F. Scott Fitzgerald once said there are no second acts in American lives. However, after having spent 20 years in the IT industry, serving in various roles from system administration to network engineer (10 of which have been in education), I’ve recently decided that my second act should be as a freelance writer covering the investor's view of the technology industry. My background in engineering gave me what I consider strong analytical skills. My 15 years of trading and investing gives me the experience to assess equities and appraise their value. I am a Warren Buffett disciple that bases investment decisions on the quality of a company's management, its growth prospects, return on equity and price-to-earnings ratio. I employ conservative strategies to increase capital while also keeping a watchful eye on macro-economic events to mitigate downside risk.

Why Apple Vs. Samsung Is Like BMW Vs. Honda

There comes a time when an investor just has to “tip their cap” to certain market events. This is once they realize that something truly remarkable has happened – this is whether or not the result is favorable. Aside from helping us become better investors, it affirms that we think as “grown-ups.” This is where I’ve arrived with Samsung.

Even though I’m an unabashed cheerleader of Apple, when assessing Samsung’s ascent to the top of the Smartphone market, I have no choice but to give the South Korean giant its due credit. Though a lot has been made about Samsung’s recent dominance, many do not fully understand how this has happened. Likewise, there are very few who believe it will continue.

Although I am bullish Apple, I’m not so quick to dismiss Samsung’s ability to maintain its current lead. On the other hand, how Apple chooses to respond has a lot to do with Samsung’s next move. Complicating matters is the fact that other players such as Microsoft, Research in Motion and Nokia are now looking to recapture market share. How much they are able to steal from Apple and Samsung remains to be seen. But as it stands right now, it’s a two team race. Who will win?

It’s Class Warfare

You can draw your own conclusions about what has been said in the courts with the ongoing patent litigation between the two bitter rivals, but Samsung still had to execute its business. Samsung figured out what Research in Motion, Microsoft and Nokia was not able to understand – if you were not going to win in Apple’s market, you had to create your own.

To that end, Samsung separated the classes and moved up the rankings by executing two basic economic factors – cost and variety. Samsung proved that it understood Apple’s ecosystem better than other rivals. It also appreciated the fact that it was never going to attract Apple loyalists to buy Samsung phones. It’s like someone driving a BMW for years and expect a company such as Honda to try to win that customer over – It’s not likely to happen.

So Samsung decided to market to those who were only looking for Honda’s price tag and offering them all the trimmings. Essentially Samsung created a showroom where phones of all types with “Apple-like features” could appeal to a population that did not have “Apple-like money.” Samsung created a market where even those “choosy” customers could find a phone with a feature that they absolutely had to have – even better, and it cost less.

Still, Samsung was ready to drop its prices lower at a moment’s notice if it felt it had to, whereas Apple kept its price point the same. Again, this is because Apple operates with the mindset that BMWs sell themselves. It’s hard to fault Apple for this stance – particularly as it is growing revenues year-over-year at an average rate of 30%.

As with BMW, it can be said that Apple targets an “affluent” consumer base, the same population that helps Apple maintain its incredibly high margins. Still, given the speed at which Samsung has now stolen the top spot in device sales, it is safe to say that their strategy has worked to perfection – much better than Apple expected. But on the other hand, does Apple really care?

Why Apple Won’t Respond or Should It?

One of the reasons that continue to set Apple apart from other tech companies is its incredibly high margin leverage. Apple makes a lot of money from each device it sells. Should its pride supersede what is best for its business? This issue is not even worth debating. Samsung is now #1 in device sales – so what! If Apple wants to regain the top spot all it has to do is drop the price of its phones and tablets and watch all of the “Samsung enthusiasts” rush into Apple stores.

Though its margins would decline, it would still be the world’s most valuable company. But I don’t see why investors would want this. It should be noted that Apple also attracts a smarter base of investors. Likewise, Apple have suppliers all over the world fighting for its business, and it has no interest in entering Samsung’s low-end market. What’s the benefit of being the best selling device if it results in little to no earnings per share? After all, both Motorola and then Nokia once held the #1 ranking. Where are they now?

Bottom line

Apple sets trends it does not follow them. Some will proclaim that Apple has already started responding to Samsung with its recent launch of the iPad mini – I disagree. That the iPad mini carries a $329 price tag, which is over 60% higher than the $199 price of Amazon’s Kindle Fire and Google’s Nexus 7 should indicate where Apple’s mentality is. Then again there are always those who wish to compare a Honda to a BMW 3 series – then perhaps. Warren Buffett said “Price is what you pay, value is what you get.” In that instance, comparisons are not always apples-to-apples.

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Are we still seeing these pathetic car analogies after all these years? It’s utter nonsense. This is not a class distinction, its a choice. I can buy an iPhone for $180, or a Galaxy S3 for $160. Seriously. It’s not about affluence. You sound like an Apple fanboi insecure in their purchase decision and position of your chosen religion in the marketplace. I don’t understand why you’re allowed to write garbage like this. I don’t understand why Apple users like to use BMW as their model either. BMW drivers are typically a-holes…. ah, the penny drops.

I am sorry Mr Author, to contradict your “opinion”. You made a wrong call without enough knowledge on smartphone (tech) market. Who told you that Samsung Phones are cheaper(price) than the Apple iPhones? Do you the price of Galaxy S3 or Galaxy Note 2 ? Here is my understanding of why Samsung had success against Apple and all others in the market Apple Revolutionised: 1) Samsung has both high end and low end models 2) Samsung created a propaganda so intense that people started comparing “Samsung to Apple” vs “Android to Apple” .. Ofcourse Apple’s lawsuit helped it too and earned Samsung enough sympathy. 3) The Galaxy line of devices are soo well built that they now comfortably beat iPhones in their own game 4) Most important of all, Apple stopped building good devices and started adding trinkets to existing devices ( I am sad for that, I hope Apple does something awesome again). 5) Anything Apple does Samsung does that in no time and infact better than Apple. Surprising but true.. There is only one thing till date that i think Apple did better than Samsung and it is “iPad Mini”..

So, I request forbes to please filter their articles and make more sense the next time.

You truly understand Apple. High volume market share is NOT how Apple competes. You said it very well Samsung creates “Apple like features” but with a Honda price tag. Once Android users actually get their hands on these phones they rarely use its features or apps because they are poorly implemented. Browsing is terrible, the apps are blown up smartphone apps for tablets (v 275k custom ipad apps), the Android store os full of shovel ware, etc. Look at the black friday numbers and you will see that Apple dominated online sales with purchases made through either an ipad or iPhone.

so you have 30% market share and expect that both your customer pay premium for your product for the rest of their lives and you can always sell well? and you said Android users doesn’t use its features or apps? did you just ask that to your Siri?

lmao, do you know how many people are user Chrome browsing? that is terrible? yet number 2 in the market? do you know how many people use apple’s browser? -15%? and how can the same app from the same developer looks different on the screens?

where have you been for the last two years? don’t live in your little apple world. Apple dominated online sales? do you know what amazon.com is? god…people living in the same world but choose to believe what they want to believe, without knowing the facts. did you even have a Nexus devices to begin your claims?

Samsung is not Honda anymore, if you think Apple is still a BMW. those reviews i read for their latest products said new Galaxy series are well designed, and iphone 5 offered a little “new”. Samsung’s flagship phones are hardware up to date, while Apple’s iphone is partly. iphone 4, 4s and 5 looks mostly the same design.

Consumers eventually learn from the market, and if you look at Google and LG’s Nexus 4, which sold out in 10 minutes for the second time, people know what is good for their money.

60 years ago, good products always sell well, but today, people have information about new technology and there are too many choices.

Motorola and Nokia lost their place in the market due to the lack of urgency to improve and did not invest in future technology, the same thing that is happening to Apple.

you can always set a great profit margin as long as people are willing to buy it. iphones are well designed, the best OS experience, and almost anyone knows how to use it. Android phones are getting better designs, the OS 4.2 comes close to iOS if not somewhat better, and is also easy to use.

people chose Samsung or Android phones over iphone is not because of money, it is because the value of the product that they pay for, and the easy access with its open system, more options, more advance setting.

OS is the most important part of a smartphone, and Apple has showen us that you don’t need state of arts hardware to run your phone well. iphone’s value is software (OS), and software can be improved, that is what Android is doing in a quick fashion.

when iphone has to put on top gears and lower their market price, that is the time when apple will fall, of course just in the smartphone market.

I use the iPhone 4s and I’m waiting to upgrade – whenever Apple decides to release the iPhone 5 in South Korea – but I disagree with some of your points. It is true that Samsung tackled a niche in the market that made it the most dominant in the smartphone industry with lower end phones but have you forgotten about Samsung’s premium phones????

The Galaxy S3 an the Galaxy Note II cost just as much if not more (at least in South Korea) as the iPhone – so your comparison does not apply. Over 35 million of these phones have been sold. Samsung may not be as popular in the United States since Apple is so dominant in the American market but there are other marketshares that are just as valuable if not more. For instance, Samsung has dominted the Asian marketshare from China, Japan and South Korea to Thailand and Vietnam. While I was studying abroad in the UK, I found that there were many fans of the Galaxy S3 as well.

I am a fan of the iPhone because I am admittedly not tech savy. I prefer the IOS because it’s fluid and easy to use. However, most of my friends own the Galaxy S3 because the Android system is more open – as in more options. I am satisfied with the iPhone 4s but I do wish that it would install some applications like NFC. It may not be a priority in the United States, but in South Korea, Japan and increasingly so in China, payments through phones have become so much more common and convenient.

You have admitted to being an Apple fanboy, but I wish that you were less bias in your report and analogy – at least research Samsung sales reports as well?? Thank you.